Brenntag ends Univar merger discussions

Univar Solutions has confirmed that Brenntag has ended discussions with it about a potential merger. The company said that it is “committed to acting in the best interest of its stockholders and will continue discussions relating to other indications of interest that have been received with respect to a potential transaction”.

Brenntag originally opened discussions with Univar in November. The deal would have brought together the world’s largest and second largest chemical distributors. Brenntag and Univar had sales of €14.4 billion and $9.5 billion respectively in 2021.

A merger would also have given Brenntag a greatly enhanced footprint on the North American market, which has been less badly affected than Europe by the energy crisis. However, the announcement was not well received in the financial markets and brought about a 17% fall in Brenntag’s share price.

On 20 December, activist investor PrimeStone, which owns 2% of Brenntag, wrote an open letter to the management urging it to end the talks. Instead, it advised them to buy back €2.5 billion in shares, increase the net debt to EBITDA ratio to about two and look to break itself up into two separate companies. Pursuing Univar, PrimeStone said, would probably reduce the two companies’ combined gross profit by 10-20%, while the regulatory review approval would be both long and difficult.